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Financial Results for the Fiscal Year ended February 28, 2014

April 10, 2014

Company name Aeon Co., Ltd. Listings The First Section of Tokyo Stock Exchange Security code 8267 URL http://www.aeon.info/ Representative Motoya Okada, President Contact Takeharu Takahashi

Head of Secretary Office Telephone +81 43-212-6042 Scheduled dates: Ordinary general meeting of shareholders May 28, 2014 Commencement of dividend payments April 30, 2014 Submission of statutory financial report May 29, 2014 Supplementary materials to the financial results Available Fiscal year-end earnings results briefing Yes (targeted at institutional investors and analysts)

(Amounts rounded down to the nearest million) 1. Consolidated Financial Results for the Fiscal Year ended February 28, 2014

(March 1, 2013 to February 28, 2014)

(1) Operating Results (Percentage figures represent year-on-year changes)

Operating revenue Operating income Ordinary income Net income

million yen % million yen % million yen % million yen % Year ended February 28, 2014 6,395,142 12.5 171,432 (10.1) 176,854 (16.8) 45,600 (38.8)

Year ended February 28, 2013 5,685,303 8.8 190,626 - 212,535 - 74,511 -

Note: Comprehensive income: Year ended February 28, 2014: 119,069 million yen (-21.6 %) Year ended February 28, 2013: 151,971 million yen (- %)

Net income per share

Net income per share– fully diluted Return on equity

Ordinary income to total assets

yen yen % % Year ended February 28, 2014 55.92 50.13 4.2 2.8

Year ended February 28, 2013 95.49 87.42 7.6 4.3

Reference: Equity in gains (losses) of equity-method affiliates: Year ended February 28, 2014: 5,819 million yen

Year ended February 28, 2013: 7,764 million yen Note: Year-on-year changes of the results for the year ended February 28, 2013 are not presented herein, because retroactive adjustments were made in line with change in the accounting policies.

(2) Financial Position

Total assets Net assets Total equity ratio Net assets per

share million yen million yen % yen

February 28, 2014 6,815,241 1,684,569 16.4 1,336.83

February 28, 2013 5,724,835 1,446,676 18.0 1,305.14

Note: Total equity: February 28, 2014: 1,120,095 million yen February 28, 2013: 1,032,586 million yen Total equity = Shareholders’ equity plus total accumulated other comprehensive income.

(3) Cash Flow Position

Cash flow from

operating activitiesCash flow from

investing activitiesCash flow from

financing activities Cash and cash equivalents

at end of period million yen million yen million yen million yen

Year ended February 28, 2014 482,765 (221,621) (67,806) 633,123

Year ended February 28, 2013 142,289 (324,869) 223,234 424,701

2. Dividends

Dividend per share

Record date or period

End-first quarter

End- second quarter

End-third quarter

Fiscal year-end

Annual total

Total dividends

paid (full year)

Payout ratio (consolidated)

Dividends to net assets

(consolidated) yen yen yen yen yen million yen % %

Year ended Feb. 28, 2013 - 12.00 - 12.00 24.00 18,975 25.1 1.9

Year ended Feb. 28, 2014 - 13.00 - 13.00 26.00 21,780 46.5 2.0

Year ending Feb. 28, 2015 (forecast)

- 14.00 - 14.00 28.00 48.9

Dividend for the year ending February 28, 2015: End-second quarter: ordinary dividend of 13 yen and commemorative dividend of 1 yen Fiscal year-end: ordinary dividend of 13 yen and commemorative dividend of 1 yen

3. Forecast of Consolidated Earnings for the Fiscal Year ending February 28, 2015


(Percentage figures represent year-on-year changes)

Operating revenue Operating income Ordinary income

million yen % million yen % million yen % Six months ending August 31, 2014 - - - - - -

Full year 7,000,000 9.5 200,000 to

210,000 16.7 to

22.5 200,000 to

210,000 13.1 to

18.7

Net income Net income per share

million yen % yen Six months ending August 31, 2013 - - -

Full year 48,000 5.3 57.29

Note: Aeon does not disclose earnings forecasts for the first six months of the fiscal year ending February 28, 2015. *Notes (1) Changes affecting the consolidation status of significant subsidiaries during the period: Yes

Newly consolidated: one (Daiei Inc.)

(2) Changes in accounting principles, accounting estimates, and retrospective restatement, etc. : 1) Changes in accordance with amendments to accounting standards: None 2) Changes other than the above 1): Yes 3) Changes in accounting estimates: None 4) Retrospective restatement: None

*For details, see “Material Changes to the Basis of Preparation of Consolidated Financial Statements” on page 22 in the Accompanying Materials.

(3) Number of shares issued (common stock) 1) Number of shares issued at end of period (treasury stock included):

February 28, 2014: 846,396,786 shares February 28, 2013: 800,446,214 shares

2) Number of shares held in treasury at end of period: February 28, 2014: 8,522,055 shares February 28, 2013: 9,275,079 shares

3) Average number of shares outstanding during the period: Year ended February 28, 2014: 815,505,407 shares Year ended February 28, 2013: 780,316,477 shares

* For number of shares serving as basis for calculation of net income per share (consolidated), see “Per Share Information” on page 33.

For Reference 1. Non-consolidated Financial Results for the Fiscal Year ended February 28, 2014


(Percentage figures represent year-on-year changes) (1) Operating Results

Operating revenue Operating income Ordinary income Net income

million yen % million yen % million yen % million yen % Year ended February 28, 2014 53,188 21.1 36,561 38.8 32,008 27.7 25,788 (10.8)

Year ended February 28, 2013 43,935 (14.1) 26,332 (27.7) 25,064 (33.1) 28,915 62.7

Net income per share

Net income per share– fully diluted

yen yen Year ended February 28, 2014 31.62 30.70

Year ended February 28, 2013 37.05 34.06

(2) Financial Position

Total assets Net assets Total equity ratio Net assets per

share million yen million yen % yen

February 28, 2014 1,180,540 639,329 54.1 762.10

February 28, 2013 1,174,960 589,531 50.1 744.17

Note: Total equity: February 28, 2014: 638,604 million yen February 28, 2013: 588,824 million yen Total equity = Shareholders’ equity plus total accumulated other comprehensive income.

*Audit Status This report is exempt from the audit requirements of Japan’s Financial Instruments and Exchange Act. As of this report’s publication, the audit of the fiscal year-end financial results had not been completed. *Appropriate Use of Earnings Forecasts and Other Important Information (Note on the forward-looking statements)

The above forecasts, which constitute forward-looking statements, are based on information available to the Company as of the date of the release of this document. Actual results may differ materially from the above forecasts due to a range of factors. For the forecasts herein, refer to “Outlook for the Fiscal Year ending February 28,2015” on page 6 in “(1) Analysis of Operating Results: Outlook for the Fiscal Year ending February 28, 2015” in the section “1. Review of Operating Results and Financial Statements” in the Accompanying Materials.

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Accompanying Materials Contents 1. Review of Operating Results and Financial Statements 2

(1) Analysis of Operating Results 2(2) Analysis of Financial Condition 7(3) Dividend Policy and Dividends for the Fiscal Year ended February 28, 2014,

and the Fiscal Year ending February 28, 2015 8

2. Management Strategies and Policies 9(1) Basic Policy on Management 9(2) Medium-term Management Strategy 9

3. Consolidated Financial Statements 11(1) Consolidated Balance Sheets 11(2) Consolidated Statements of Income and Consolidated Statements of

Comprehensive Income 14

(3) Consolidated Statements of Changes in Shareholders’ Equity 17(4) Consolidated Statements of Cash Flows 19(5) Notes on the Going-concern Assumption 21(6) Material Changes to the Basis of Preparation of Consolidated Financial

Statements 21

(7) Additional Information 21(8) Notes on the Consolidated Financial Statements 22

(Segment and Other Information) 23(Per Share Information) 32(Material Subsequent Events) 33

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1. Review of Operating Results and Financial Statements (1) Analysis of Operating Results Summary of Operating Results In the fiscal year ended February 28, 2014, amid yen depreciation and rising stock prices accompanying economic stimulus measures by the Japanese government and large-scale monetary easing by the Bank of Japan, the Japanese economy staged a moderate recovery highlighted by higher capital spending, corporate profit growth, mainly among export-oriented companies, and an improved employment environment. In terms of personal consumption, spending on luxury goods and some other items rose due to a last-minute demand surge prior to the April increase in consumption tax. Overall, however, consumers remained thrifty on spending for daily necessities due to persistent concerns over lower disposable income. Additionally, unseasonable weather during the second half of the fiscal year led to lower sales of seasonal goods, primarily clothing. As a result of these factors, the economic environment surrounding the Aeon Group remained severe during the fiscal year. In the final year of the current Medium-term Management Plan (FY2011-FY2013), Aeon strove to expand its business by executing a common Group strategy prioritizing Asian markets, urban markets, senior-oriented markets, and digital markets in order to capture business opportunities in new growth areas. Regarding the shift to Asian markets, Aeon Vietnam Co., LTD. and Aeon Mall Co., Ltd. opened Aeon Mall Tân Phú Celadon in January 2014 as their first commercial facility ranking as one of the largest shopping centers in the country. Additionally, Aeon Financial Service Co., Ltd. obtained a business license in Myanmar in July 2013 to become the first Japanese company to offer full-fledged consumer credit card services in the country. Through these and other initiatives, the Aeon Group strove to strengthen its unified business foundation in newly emerging Asian markets with promising growth prospects. Regarding the shift to urban markets, Aeon made Daiei Inc. a consolidated subsidiary in August 2013 to promote a dominant Group position in urban markets, primarily in the Tokyo metropolitan area. Aeon also acquired all shares in Peacock Store Ltd. (currently Aeon Market Co., Ltd.) in March 2013 from J. Front Retailing Co., Ltd. to bolster its business foundation in Japan’s three largest urban areas. Regarding the shift to senior markets, Aeon completed a comprehensive renovation of the Aeon Kasai Store (Tokyo) in May 2013 to include a new G.G. Mall which combines Group companies’ know-how in serving the “Grand Generation (G.G.) ” of senior citizen customers. Aeon will continue to enhance its services, product line-up and sales floors to satisfy G.G. customers. Regarding the shift to digital markets, on the Group comprehensive portal website AEON SQUARE, the Group’s first e-commerce sites were opened for Oyacom, Aeon Bike, and Sports Authority. Additionally, Aeon Mall Makuhari New City, the Aeon Group’s flagship shopping center in Chiba Prefecture, began to develop a new business model which promotes mutual customer traffic between brick-and-mortar and Internet retailing services. These initiatives are part of Aeon’s omni-channel strategy which combines experience, product, and internet at each sales floor to further enhance customer convenience. With regard to structural reform, in the financial services business, the bank holding company Aeon Financial Service Co., Ltd. was launched in April 2013 as a retail-based financial services group merging retail with finance. In the shopping center development business, in November 2013, Aeon Retail Co., Ltd. transferred its shopping center operation and management business to Aeon Mall Co., Ltd. The consolidation of these business functions is aimed at establishing a business structure to support higher profitability and growth. As a result of these activities, for the fiscal year ended February 28, 2014, Aeon and its 263 consolidated subsidiaries earned consolidated operating income of 171,432 million yen (down 10.1% year on year), consolidated ordinary income of 176,854 million yen (down 16.8% year on

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year) which includes the results of 31 equity-method affiliates, and consolidated net income of 45,600 million yen (down 38.8% year on year) on consolidated operating revenue of 6,395,142 million yen (up 12.5% year on year), representing the highest annual operating revenue in Aeon’s history.

Business Segment Information

GMS Business The GMS Business earned operating income of 35,038 million yen (down 24.5% year on year) on operating revenue of 3,053,484 million yen (up 14.6% year on year) for the fiscal year ended February 28, 2014.

The GMS Business opened eight new stores and closed 9 stores during the fiscal year. The GMS Business continued to implement reforms designed to establish a new high-growth, high-profit business model. The initiatives focused on strengthening sales of Aeon private brand (PB) Topvalu, the refurbishment of existing stores to raise store competitiveness, and the promotion of sales floor specialization through highly specialized products and services. Through these measures, the business strove to improve earnings power by enhancing sales floor competitiveness. The business held “Topvalu Week” in Japan from the first to seventh day of every month to promote new and seasonal product and enhance brand awareness of Topvalu merchandise. Regarding sales floor specialization, Aeon Retail Co., Ltd. spun off its liquor operations to start Aeon Liquor Co., Ltd. in March 2013, following a similar initiative in September 2012 to establish Aeon Bike Co., Ltd. In collaboration with Aeon Retail, Aeon Liquor promoted the expansion of specialized liquor stores while also establishing a new style of sales floor at Aeon Mall Makuhari New City shopping center which uses the omni-channel strategy to combine experience, product, and internet to offer one of Japan’s largest wine shops. Through these measures, the business succeeded in developing new business models.

Supermarket Business The Supermarket Business earned operating income of 12,208 million yen (down 44.2% year on year) on operating revenues of 1,553,856 million yen (up 4.9% year on year) for the fiscal year ended February 28, 2014. The Supermarket Business opened 69 new stores and closed 70 existing stores during the fiscal year (excluding equity-method affiliates, the business opened 47 and closed 60 stores). The Supermarket Business strengthened competiveness by expanding operations through continued store openings and promoting business and capital alliances with other supermarket businesses in our operating territory along with regional mergers of Group companies. The business also leveraged its No. 1 position in Japan’s supermarket industry, with a network of more than 1,000 stores, to attract customers through unified sales promotions, while making steady progress refurbishing existing stores by responding to changing customer lifestyles such as growing demand for quick and easy meals. These initiatives contributed to bolstering operating revenues. In December 2013, Maxvalu Hokkaido Co., Ltd. concluded a business and capital alliance agreement with Hokkaido supermarket operator ichimaru Co., Ltd. to further boost its competitiveness in the region. In July 2013, Maxvalu Tohoku Co., Ltd. acquired seven supermarkets from Powers Fujimi Co., Ltd. in Niigata Prefecture to expand its business and launch full-scale supermarket operations in the region. In March 2014, Maxvalu Tohoku Co., Ltd. merged its operations with Maxvalu Kitatohoku Co., Ltd., which is based in the Tohoku region, to fortify the business foundation through the consolidation of business resources and enhanced efficiency. In March 2013, Maxvalu Tokai Co., Ltd. and Aeon Kimisawa Co., Ltd., which both do business in the Shizuoka area, conducted a merger to share their store operation and product lineup know-how and establish a robust, unified business foundation. Maxvalu Tokai Co., Ltd. is the surviving company.

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Strategic Small-size Store Business The Strategic Small-size Store Business recorded operating income of 4,461 million yen (up 9.1% year on year) on operating revenues of 280,155 million yen (up 15.8% year on year) for the fiscal year ended February 28, 2014. The Strategic Small-size Store Business opened 614 new stores and closed 297 existing stores during the fiscal year (excluding equity-method affiliates, the business opened 555 and closed 287 stores). To promote the shift to urban markets, the business bolstered its foundation in urban markets by accelerating the expansion of small-scale urban-type supermarket chain My Basket and small-scale discount store chain Acolle in the Tokyo metropolitan area and striving to establish a dominant presence. As of February 28, 2014, the My Basket chain totaled 450 stores and achieved profitability for the fiscal year. Group company Origin Toshu Co., Ltd. gradually introduced its delicatessen know-how to the small-scale store chains as well as to Daiei Inc. in order to generate Group synergy and boost earnings. In Japan, Ministop Co., Ltd. expanded its desert lineup, one of its competitive strengths, and bolstered sales of in-store-prepared fast-foods. Overseas, the company opened five new stores in Indonesia, which marks its sixth overseas market. Through this initiative, the company expanded its store network and fortified its business foundations in the region. Origin Toshu Co., Ltd. opened a new chain, Kitchen Origin, which features a range of healthy foods, noodles, and desserts. This and other initiatives were aimed at establishing a business model responsive to changes in Japan’s social structure, including the increase in female workers and single-person households.

Specialty Store Business The Specialty Store Business posted operating income of 3,546 million yen (down 38.3% year on year) on operating revenue of 341,572 million yen (down 2.5% year on year) in fiscal year ended February 28, 2014. The Specialty Store Business actively expanded the number of stores within Group shopping centers, promoted sales events utilizing Aeon Credit Card and WAON card, and strove to develop and expand sales of PB products. Through these initiatives, the business endeavored to maximize the use of Group strengths and improve earnings. G Foot Co., Ltd. improved profitability by consolidating its store brands for each business type and promoting higher brand awareness, while developing new PB products for each business type and bolstering sales to increase profit.

Other Operations While most national brands in Japan raised prices to contend with a weaker yen and soaring raw materials costs, Aeon Topvalu Co., Ltd. responded to customers’ heightened desire to protect their quality of life by freezing prices on the Topvalu lineup of some 5,000 products through improved efficiencies in procurement, manufacturing, and logistics operations. Additionally, to commemorate the 40th anniversary of Aeon’ s private brand, measures were taken to refresh the Topvalu brand lineup. The company consolidated the Topvalu brand into four-part structure and strengthened its three-tier price structure approach to respond to customers’ diversified tastes and budgets while continually improving quality based on customer feedback and renewing the packaging designs. As a result, total sales of Topvalu merchandise throughout the Group in the fiscal year ended February 28, 2014 increased 8.7% year on year to 741,000 million yen.

Finance

Financial Services Business

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The Financial Services Business earned operating income of 40,884 million yen (up 20.7% year on year) on operating revenue of 285,690 million yen (up 47.1% year on year) for the fiscal year ended February 28, 2014. Launched in April 2013, bank holding company Aeon Financial Service Co., Ltd. promoted the credit card, banking, insurance, and e-money businesses with the aim of fortifying the earnings foundation. In May 2013, the company made Toshiba Finance Corporation (currently Aeon Product Finance Co., Ltd.) a consolidated subsidiary to promote the installment sales business, including car loans and home reform loans, as a new profit pillar by leveraging Toshiba Finance’s expertise in the areas. In the e-money business, cumulative issuance of WAON cards as of the end of the fiscal year rose to approximately 39 million cards, and transaction volume in the period totaled 1,577,900 million yen, an increase of 31.8% over the previous fiscal year. The growth was mainly due to the expansion of the WAON card at Aeon Market Co., Ltd. and other companies newly joining the Group in the period. In the banking business, in-store branches were opened and Aeon Bank ATM machine installations expanded. A strategic ATM partnership was also concluded with Mizuho Bank, expanding the number of financial institution cards which customers can use to complete transactions to approximately 600. Aeon Financial Service also improved customer convenience through such measures as starting yen withdrawals in Japan using credit cards and cash cards issued by foreign financial institutions, which helps serve the increasing number of foreign visitors. Overseas, Aeon Big (M) Sdn. Bhd. began credit cardholder solicitation campaigns in Malaysia, while implementing joint sales promotions with Group retailing companies in Hong Kong, Thailand, and Malaysia in order to further expand business.

Shopping Center Development

Shopping Center Development Business The Shopping Center Development Business earned operating income of 43,384 million yen (up 1.0% year on year) on operating revenue of 219,797 million yen (up 8.1% year on year) in the fiscal year ended February 28, 2014. Aeon Mall Co., Ltd. strengthened its financial foundation through a public offering of new shares in June 2013 and a third-party allotment of shares in July 2013. In November 2013, the company transferred the property and buildings of six domestic shopping centers to Aeon Reit Investment Corporation to create a new fund procurement method to support future growth and improved capital efficiency. In Japan, Aeon Mall Co., Ltd. opened five shopping centers during the fiscal year, including a property management contract for one center, while completely refurbishing 11 existing shopping centers by introducing new tenants and making changes to tenant business types. In China, the company opened Aeon Mall Tianjin Meijiang in January 2014 as its third shopping center in Tianjin. In ASEAN, the company opened its first shopping center in Vietnam in January 2014 and started preparations to open its first shopping centers in Cambodia and Indonesia to expand business in growth markets.

Services

Service Business The Service Business earned operating income of 19,889 million yen (up 0.6% year on year) on operating revenue of 387,360 million yen (up 12.7% year on year) in the fiscal year ended February 28, 2014. Aeon Delight Co., Ltd. (Aeon Delight) continued to take measures in the business support field, one of its earnings pillars, to bolster earnings through the establishment of a comprehensive facilities management services (FMS) business designed to lower customers’ total building costs. Aeon Delight also leveraged its know-how in providing high-quality management services for the Aeon Group’s large-scale facilities to actively provide facilities management services for drugstores,

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logistics centers and other businesses outside the Group. Kajitaku Co., Ltd., an Aeon Delight Group company, strove to nurture new business by strengthening lifestyle support services to meet growing demand for housework and other services. In China, Aeon Delight expanded its business by making Wuhan Xiaozhu Comprehensive Facility Management Service Co., Ltd., the largest building maintenance company in Wuhan, a consolidated subsidiary in July 2013. Aeon Fantasy Co., Ltd. consolidated the name of indoor amusement centers in and outside Japan to “Mollyfantasy” in order to raise brand awareness. To expand market share in overseas markets, the company opened 25 amusement centers in China, 16 in Malaysia, and 11 in Thailand during the fiscal year.

ASEAN and China

ASEAN Business (Aeon’s consolidated financial statements for ASEAN Business for the fiscal year reflect results mainly for January through December.) The ASEAN Business earned operating income of 6,602 million yen (down 1.2% year on year) on operating revenue of 181,671 million yen (up 75.9% year on year). The ASEAN Business opened one GMS store (Malaysia), 13 supermarkets (Thailand), and one discount store (Malaysia), while closing two supermarkets (Thailand) in the year. In September 2013, Aeon Co. (M) Bhd. (Aeon Malaysia) concluded a strategic partnership with Index Living Mall Co., Ltd., which sells furniture, interior goods and other home products in Thailand, and established the joint venture Aeon Index Living Sdn. Bhd. in February 2014. Aeon Malaysia began planning and developing local TOPVALU products and launched the new products in September 2013 in order to strengthen profitability. Additionally, Aeon Malaysia and Aeon Big (M) Sdn. Bhd. began jointly procuring products to lower costs. Aeon (Thailand) Co., Ltd. opened its first store in the Bangkok suburbs to further expand business. China Business (Aeon’s consolidated financial statements for China Business for the fiscal year reflect results for January through December.) The China Business posted an operating loss of 1,765 million yen (a year-on-year increase of 69 million yen) on operating revenue of 145,463 million yen (up 28.8% year on year). The China Business opened six GMS stores and one supermarket, while closing one supermarket in the year. In order to continue steady growth in China and capture new growth opportunities, Aeon (Hubei) Co., Ltd. (Wuhan City, Hubei Province) and Aeon East China (Suzhou) Co., Ltd. (Suzhou City, Jiangsu Province) were established in June 2013 and relevant business licenses have been obtained allowing us to open shopping centers in 2014. The business strove to improve the earnings of existing stores and respond to growing awareness of product safety and security by expanding the sale of Topvalu brand merchandise. The business also leveraged Aeon Group infrastructure to offer Tuesday sales and special promotions for member cardholders. As a result, the business posted robust growth at existing store. Outlook for the Fiscal Year ending February 28, 2015 Consolidated Operating Results Forecast (millions of yen, except per-share data and percentages)

Fiscal year to end-February, 2015 (forecast) 2014 (actual) Operating revenue 7,000,000 6,395,142 Operating income 200,000~210,000 171,432 Ordinary income 200,000~210,000 176,854 Net income 48,000 45,600 Net income per share (yen) 57.29 55.92 ROE (%) 4.3 4.2

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In the past three fiscal years, the Aeon Group has pursued a common strategy of prioritizing business in Asian markets, urban markets, senior markets, and digital markets by shifting management resources into these four growth areas. For the next three years starting with the fiscal year ending February 28, 2015, Aeon will use the management foundation created under the previous medium-term management plan to execute the “Aeon Group Medium-term Management Plan (FY2014~2016)” as the second phase of its effort to achieve a major leap in growth towards 2020. In the new plan, dedicated executives and organizations will be assigned for each of the four growth markets to accelerate the shift to these areas. In addition, product-oriented reforms will be implemented as a new initiative to promote profit growth in the retail businesses by executing product development that rapidly responds to customer needs. To ensure sustainable growth, Aeon will also promote a financial strategy prioritizing efficiency. The strategy will aim to improve capital efficiency and establish rigorous investment standards to ensure that priority investment allocations are smoothly towards growth areas. On March 1, 2014, organizational reforms were implemented at Aeon Retail Co., Ltd. in conjunction with the start of the second phase of business reforms in the core GMS business from the fiscal year ending February 2015. The new organizational structure promotes integrated sales and product management to enhance GMS reforms, a unified digital organization to accelerate the omni-channel strategy, and store earnings structure reforms to achieve a high earnings structure. Through these initiatives, the GMS business will aim to create new business models merging experience, product, and internet to better respond to the changing lifestyles and values of customers. (2) Analysis of Financial Condition Consolidated Assets, Liabilities, Net Assets, and Cash Flows (millions of yen)

Fiscal year to end-February, 2014 2013 2012 2011 Total assets 6,815,241 5,724,835 4,048,937 3,774,628Interest-bearing debt 1,574,892 1,639,048 1,335,186 1,161,854

Breakdown: Interest-bearing debt of financial

subsidiaries 633,369 718,075 523,050 518,739

Interest-bearing debt excluding that of financial subsidiaries

941,522 920,972 812,136 643,115

Net assets 1,684,569 1,446,676 1,282,066 1,219,236Cash and cash equivalents, ending

balance 633,123 424,701 166,277 306,820

Cash flow from operating activities 482,765 142,289 203,382 261,132Cash flow from investing activities (221,621) (324,869) (327,865) (105,517)Cash flow from financing activities (67,806) 223,234 (13,061) (121,847)

*As stated on page 22, “Material Changes to the Basis of Preparation of Consolidated Financial Statements,” the method for inventory valuation used in some consolidated subsidiaries has changed beginning with the fiscal year under review. The above figures for the fiscal year ended February 28, 2013 have been retrospectively adjusted to reflect the change in accounting policy. In terms of the impact for the fiscal year ended February 29, 2012 and prior years, the cumulative impact is reflected in the net assets at the start of the fiscal year ended February 28, 2013.

Consolidated Assets, Liabilities, and Net Assets as of February 28, 2014 Consolidated assets at February 28, 2014 totaled 6,815,241 million yen, an increase of 1,090,406 million yen, or 19.0%, from the end of the previous fiscal year (February 28, 2013). The increase

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was chiefly attributable to a 376,187 million yen increase in notes and accounts receivable-trade, which consists mostly of installment plan accounts receivable at financial subsidiaries, along with increases of 232,027 million yen in loans and bills discounted for banking business, 196,809 million yen in cash and time deposits, and 241,106 million yen in property, buildings and equipment, which includes the assets of newly consolidated Daiei, Inc. and its subsidiaries. Consolidated liabilities at February 28, 2014 totaled 5,130,672 million yen, an increase of 852,513 million yen, or 19.9%, from February 28, 2013. The increase was chiefly attributable to increases of 546,006 million yen in deposits for banking business and 109,720 million yen in notes and accounts payable-trade. Consolidated net assets at February 28, 2014 totaled 1,684,569 million yen, an increase of 237,893 million yen, or 16.4%, from February 28, 2013. The increase was chiefly attributable to an increase of 20,953 million yen in both common stock and capital surplus from the conversion of unsecured convertible bonds with stock acquisition rights, as well as an increase of 150,227 million yen in minority interests.

Consolidated Cash flows Cash and cash equivalents The balance of cash and cash equivalents at February 28, 2014 was 633,123 million yen, an increase of 208,422 million yen, or 49.1%, from February 28, 2013. Cash flow from operating activities Net cash provided by operating activities in the fiscal year ended February 28, 2014 was 482,765 million yen (up 239.3% year on year). The 340,476 million yen increase from the previous fiscal year reflects increases of 234,812 million yen in notes and accounts receivable-trade and 106,617 million yen in loans in banking business, which were offset by increases of 525,993 million yen in deposits received in banking business, and 29,408 million yen in income before income taxes and minority interests, excluding depreciation and amortization and other non-cash expenses. Cash flow from investing activities Net cash used in investing activities during the fiscal year ended February 28, 2014, was 221,621 million yen (down 31.8% year on year). This 103,248 million yen decrease from the previous year reflects a 143,350 million yen increase in purchase of marketable securities in banking business, which was offset by an increase of 158,188 million yen in proceeds from sale of fixed assets, including sale of assets by Aeon Retail Co., Ltd. and Aeon Mall Co., Ltd. to Aeon Reit Investment Corporation, and an increase of 126,825 million yen in proceeds from sale and redemption of marketable securities in banking business. Cash flow from financing activities Net cash used in financing activities during the fiscal year ended February 28, 2014, was 67,806 million yen (compared with net cash provided of 223,234 million yen in the previous fiscal year). This 291,041 million yen decrease mainly reflects a 244,163 million yen net decrease in short-term borrowings and commercial paper. (3) Dividend Policy and Dividends for the Fiscal Year ended February 28, 2014, and the Fiscal Year ending February 28, 2015 1) Basic Medium- to Long-Term Policy Aeon Co., Ltd. strives to maintain an optimal balance between paying dividends and improving corporate value through medium- to long-term growth as a key management priority. It believes in returning profits to shareholders, whom it considers partners in business management. (Dividends)

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Aeon Co., Ltd. sets dividends in consideration of its consolidated earnings results and strives to reward shareholders appropriately for capital invested. Specifically, Aeon has set a target of maintaining its annual dividend payment at or above the previous year’s payment and implementing a dividend payout ratio of 30% as the Aeon Group endeavors to increase earnings and return even more to shareholders in coming years. (Use of internal reserves) Internal reserves are essential for funding investments in future growth. Aeon Co., Ltd. strives to meet shareholder expectations by improving corporate value through medium- to long-term growth. 2) Dividends for the Fiscal Year ended February 28, 2014, and Starting Date for Dividend Payments Pursuant to a resolution by the Board of Directors at its meeting on April 10, 2014, the year-end dividend payment from retained earnings for the fiscal year ended February 28, 2014 will be 13 yen a share. The total annual dividend for the fiscal year will therefore be 26 yen a share, including the interim payment of 13 yen a share. The starting date for dividend payments (effective date) is Wednesday, April 30, 2014. 3) Dividend Forecast for the Fiscal Year ending February 28, 2015 Based on the basic policy outlined above, and in consideration of the 40th anniversary of Aeon’s stock exchange listing, the forecast for dividend payments for the fiscal year ending February 28, 2015 is 28 yen per share, consisting of an interim payment of 13 yen per share and 1 yen per share commemorative payment, and a year-end payment of 13 yen per share and 1 yen per share commemorative payment. 2. Management Strategies and Policies (1) Basic Policy on Management Aeon’s fundamental management principles are the pursuit of peace, respect for humanity, and contributions to local communities—with the customer’s point of view as the core. On the basis of this unchanging philosophy, the Aeon Group focuses first and foremost on its customers and ensuring customer satisfaction, constantly innovating to promptly and precisely respond to changes in the external environment and customer needs. Aeon aims to be a “glocal” company, meaning that management must both meet global quality standards and at the same time remain rooted in local communities. From the viewpoint of corporate social responsibility (CSR), the company has instituted the Aeon Code of Conduct, a set of behavior guidelines and standards for decision-making for all Group employees to follow in their daily work activities. Aeon is instilling this code throughout the Group. On the basis of this code, Aeon is striving to achieve long-term prosperity and growth by building excellent relationships with its customers, shareholders, business partners, local communities, and employees, while continuing to offer products and services that satisfy customers. (2) Medium-term Management Strategy Response to Four Megatrends Aeon has formulated the “Aeon Group Medium-term Management Plan (FY2014~2016)” as the second phase of its effort to achieve a major leap in growth towards 2020. The new Medium-term Management Plan will accelerate the shift to four growth markets, a strategic goal of the previous plan, as well as promote product-oriented reforms. The execution of these two innovations will enable the Aeon Group to rapidly respond to customer change and achieve a leap in growth. 1) Shift to Asian Markets In the previous Medium-term Management Plan, Aeon prepared for the opening of shopping centers in new geographic and business areas. In January 2014, Aeon opened its first shopping center in Vietnam. Under the new Medium-term Management Plan, Aeon will accelerate the expansion of

10

shopping centers in other geographic and business areas. In fiscal 2014, the second shopping center will open in Vietnam, while the first centers for Cambodia and Indonesia are scheduled to open. In China, the Group’s first shopping centers are scheduled to open in the new regions of Jiangsu and Hubei provinces in fiscal 2014. These shopping centers will be platforms for driving Group growth and unifying Group businesses to promote the shift to Asian markets. In existing markets providing robust growth opportunities, such as Malaysia and China, Aeon will strive to enhance competitiveness by maximizing Group synergy through such measures as sharing know-how accumulated in Japan and deploying infrastructure to achieve global merchandising. 2) Shift to urban markets Aeon will accelerate the expansion of small-scale urban-type supermarket chain My Basket, which achieved profitability in fiscal 2013, as well as small-scale discount store chain Acolle. Aeon will also seek to increase its market share in urban markets and raise profits by expanding Daiei, Inc. and Aeon Market Co., Ltd., which have been made consolidated subsidiaries. 3) Shift to senior-oriented markets Aeon recognizes active senior citizen customers with a passion for shopping as the “Grand Generation (G.G.)” and is establishing new business models to meet the needs of this consumer group through such initiatives as the G.G. Mall and G.G. Card. Under the new Medium-term Management Plan, Aeon will strengthen the development of successful business models throughout Group businesses, while accelerating the shift in merchandising for seniors by developing new products to meet their needs and bolstering product lineups. 4) Shift to digital markets Aeon will promote full-fledged expansion of digital business by leveraging AEON SQUARE, AEON Net Super and other platforms developed under the previous Medium-term Management Plan. Aeon will not only bolster e-commerce services in which shopping can be completed over the Internet, but promote an omni-channel strategy which combines Internet and brick-and-mortar shopping services. These services will include a multi-format approach to leverage the store network by enabling customers to pick up goods ordered over the Internet, or have goods purchased at a store delivered to their homes. The advancement of omni-channel strategy combining experience, product, and internet will help to accelerate the Group’s growth. Product-oriented Reforms 1)Promoting product, sales areas responsive to new customer needs In modern society, customers have less time to prepare meals at home, and this trend is expected to accelerate in the future. Aeon will strengthen its ability to innovate its products to respond to these kinds of lifestyle changes. In regard to food products, Aeon will develop new products and sales areas based on such concepts of “pre-prepared” and “healthy organic” instead of the traditional sales area concepts of fresh foods and food ingredients. These initiatives will be promoted throughout all product lines to achieve product-oriented reforms. 2)Further promotion of TOPVALU private brand Aeon is renewing its Topvalu product lineup in the spring of 2014 in order to use the April 2014 consumption tax increase as a Group growth opportunity. Additionally, Aeon will further promote product development based on a three-tier brand structure featuring Topvalu SELECT, Topvalu, and Topvalu BESTPRICE merchandise as a way to respond to the diversifying needs of customers. Through these initiatives, Aeon will aim to become Japan’s No. 1 private brand in terms of size, quality, and safety and security. Financial Reforms to Support Growth

11

Aeon will strive to establish a robust financial foundation to support the leap in growth towards 2020, including maximizing cash flows through improved investment and capital efficiency, as well as diversifying the capital procurement methods.

12

3. Consolidated Financial Statements

(1) Consolidated Balance Sheets

(Millions of yen) As of

February 28, 2013 As of

February 28, 2014 Amount Amount

Assets Current assets

Cash and time deposits 457,174 653,984Call loans 10,000 -Notes and accounts receivable - trade 518,695 894,882Marketable securities 241,523 169,628Merchandise inventories 377,027 468,499Deferred tax assets 46,566 47,894Financial loan 420,160 302,471Loans and bills discounted for banking business 668,971 900,998Other 203,437 222,948Allowance for doubtful accounts (39,998) (48,529)Total current assets 2,903,558 3,612,778

Fixed assets Property, buildings and equipment

Buildings and structures, net 1,117,272 1,189,183 Tools, furniture and fixtures, net 141,141 169,321 Land 628,613 726,035 Lease assets, net 20,307 28,395 Construction in progress 29,569 63,028 Other, net 4,797 6,845 Total property, buildings and equipment 1,941,702 2,182,809

Intangible fixed assets Goodwill 140,852 142,406 Software 40,160 53,364 Lease assets 898 556 Other 23,203 34,140 Total intangible fixed assets 205,115 230,467

Investments and other assets Investment securities 191,497 200,269 Deferred tax assets 62,875 71,192 Fixed leasehold deposits to lessors 321,606 401,045 Deposits for stores in progress 4,410 6,045 Other 109,658 139,826 Allowance for doubtful accounts (15,588) (29,193) Total investments and other assets 674,458 789,186 Total fixed assets 2,821,277 3,202,463Total assets 5,724,835 6,815,241

13




Liabilities Current liabilities

Notes and accounts payable - trade 633,246 742,967Deposits for banking business 1,155,319 1,701,326Short-term borrowings 262,858 259,064Current portion of long-term debt 234,229 197,868Bonds due within one year 36,942 57,862Convertible bonds with stock acquisition rights due within one year

49,958 -

Commercial paper 48,942 10,000Lease obligations 3,248 9,074Income taxes payable 40,616 53,414Provision for bonuses 19,199 24,362Provision for store closing expenses 1,353 4,770Allowance for point program 15,334 22,251Notes payable, construction 45,193 67,160Other 396,036 515,124

Total current liabilities 2,942,480 3,665,246

Long-term liabilities Bonds 244,895 188,390Convertible bonds with stock acquisition rights 30,000 3,910Long-term debt 702,572 814,393Lease obligations 19,850 26,079Deferred tax liabilities 17,837 26,365Liability for employees’ retirement benefits 9,506 47,020Liability for directors' retirement benefits 1,297 969Provision for store closing expenses 2,010 10,093Provision for contingent liabilities 514 597Allowance for loss on refund of interest received 4,133 3,084Allowance for loss on redemption of gift coupons 3,190 4,545Asset retirement obligations 45,654 61,760Lease deposits from lessees 229,276 250,810Other 24,936 27,404

Total long-term liabilities 1,335,678 1,465,426Total liabilities 4,278,159 5,130,672

14




Net assets Shareholders’ equity

Common stock 199,054 220,007Capital surplus 264,963 285,917Retained earnings 571,960 589,943Treasury stock (16,091) (10,933)

Total shareholders’ equity 1,019,887 1,084,935

Accumulated other comprehensive income Unrealized gain on available-for-sale securities 17,909 23,318Deferred gain (loss) on derivatives under hedge accounting

(1,383) (2,122)

Foreign currency translation adjustments (3,827) 13,964 Total accumulated other comprehensive income 12,699 35,160

Stock acquisition rights 1,514 1,670Minority interests 412,575 562,802Total net assets 1,446,676 1,684,569

Total net assets and liabilities 5,724,835 6,815,241

15

(2) Consolidated Statements of Income and Consolidated Statements of Comprehensive Income

Consolidated Statements of Income

(Millions of yen) Year ended

February 28, 2013Year ended


Operating revenue Net sales 5,061,929 5,619,270Operating revenue in the financial services business 168,171 256,445Other operating revenue 455,201 519,426Total operating revenue 5,685,303 6,395,142

Operating costs Cost of sales 3,695,896 4,101,766Operating costs in the financial services business 14,700 24,863Total operating costs 3,710,596 4,126,630

Gross profit on sales 1,366,033 1,517,503Gross profit from operations 1,974,707 2,268,512Selling, general and administrative expenses

Advertising expense 115,652 146,813Provision of allowance for doubtful accounts 18,603 28,078Employees’ salaries and bonuses 625,395 716,160Provision for bonuses 19,199 24,362Statutory welfare benefit expense 99,310 114,591Utilities expense 97,092 122,961Depreciation and amortization 141,767 162,467Repairs and maintenance expense 95,905 108,696Rent expense 283,132 326,462Amortization of goodwill 9,196 11,300Other 278,826 335,184Total selling, general and administrative expenses 1,784,080 2,097,079

Operating income 190,626 171,432Other income

Interest income 2,767 3,367Dividend income 1,800 2,201Equity in gains of equity-method affiliates 7,764 5,819Amortization of negative goodwill 8,238 192Penalty income from leaving tenants 1,232 1,560Reversal of allowance for doubtful accounts 4,912 332Gain on collection of fixed leasehold deposits 2,234 1,793Other 8,316 10,051Total other income 37,265 25,317

Other expenses Interest expense 10,975 13,056Other 4,381 6,838Total other expenses 15,356 19,895

Ordinary income 212,535 176,854

16

(Millions of yen)

Year ended February 28, 2013


Amount Amount Extraordinary gains

Gain on sale of fixed assets 946 7,308Gain on negative goodwill 332 14,182Gain on sale of subsidiaries’ stock 7,336 462Gain on change in equity interest 1,609 10,990Gain on step acquisition 8,355 -Other 1,362 1,553Total extraordinary gains 19,943 34,498

Extraordinary losses Loss on disposal of fixed assets 2,018 1,544Impairment loss 31,934 35,216Loss related to store closing 2,198 1,132Provision for store closing expenses 514 2,226Loss on sale of fixed assets 405 8,069Loss on step acquisition - 9,760Management integration expenses in the financial services business

- 1,820

Other 3,542 4,041Total extraordinary losses 40,613 63,812

Income before income taxes and minority interests 191,865 147,540Income taxes

Current 71,423 73,574Deferred 11,921 (9,128)Total income taxes 83,345 64,445

Income before minority interests 108,520 83,094Minority interests 34,009 37,493Net income 74,511 45,600

17

Consolidated Statements of Comprehensive Income




Income before minority interests 108,520 83,094Other comprehensive income

v Unrealized gain on available-for-sale securities 16,239 6,099

Deferred gain (loss) on derivatives under hedge accounting

384 (1,634)

v Foreign currency translation adjustments 26,594 31,304 Share of other comprehensive income of

equity-method affiliates 231 206

Total other comprehensive income 43,450 35,975Comprehensive income 151,971 119,069 (Breakdown) Comprehensive income attributable to owners of the

parent 105,174 68,061

Comprehensive income attributable to minority interests

46,796 51,008

18

(3) Consolidated Statements of Changes in Shareholders’ Equity Year ended February 28, 2013 (March 1, 2012 – February 28, 2013)

(Millions of yen) Shareholders’ Equity

Common stock Capital surplus Retained earnings Treasury stock

Total shareholders’ equity

Balance at beginning of period

199,054 264,963 543,771 (54,087) 953,701

Cumulative effect of changes in accounting policies

(673) (673)

Restated balance 199,054 264,963 543,097 (54,087) 953,028

Changes during period

Cash dividends (27,177) (27,177)

Net income 74,511 74,511

Repurchase of stock (5) (5)

Disposal of treasury stock (18,470) 38,001 19,531

Net change in items other than shareholders’ equity during period

Total changes during period - - 28,862 37,996 66,859

Balance at end of period 199,054 264,963 571,960 (16,091) 1,019,887

(Millions of yen)

Accumulated other comprehensive income

Unrealized gain on

available-for-sale securities

Deferred gain (loss)

on derivatives

under hedge accounting

Foreign currency

translation adjustments

Total accumulated

other comprehensive income

Stock acquisition

rights

Minority interests

Total net assets


1,853 (1,923) (17,893) (17,964) 1,313 345,015 1,282,066

Cumulative effect of changes in accounting policies

(120) (794)

Restated balance 1,853 (1,923) (17,893) (17,964) 1,313 344,894 1,281,271


Cash dividends (27,177)

Net income 74,511

Repurchase of stock (5)

Disposal of treasury stock 19,531


16,056 540 14,066 30,663 200 67,681 98,545

Total changes during period 16,056 540 14,066 30,663 200 67,681 165,404

Balance at end of period 17,909 (1,383) (3,827) 12,699 1,514 412,575 1,446,676

19

Year ended February 28, 2014 (March 1, 2013 – February 28, 2014) (Millions of yen)

Shareholders’ Equity

Common

stock Capital surplus

Retained earnings

Treasury stock

Total shareholders’

equity Balance at beginning of period

199,054 264,963 571,960 (16,091) 1,019,887


Issuance of new shares 20,953 20,953 41,907

Cash dividends (20,276) (20,276)

Net income 45,600 45,600

Repurchase of stock (12,010) (12,010)

Disposal of treasury stock (7,340) 17,168 9,827


Total changes during period 20,953 20,953 17,983 5,157 65,047

Balance at end of period 220,007 285,917 589,943 (10,933) 1,084,935

(Millions of yen)

Accumulated other comprehensive income

Unrealized gain

on available-for-sale

securities

Deferred gain (loss) on

derivatives under hedge accounting

Foreign currency

translation adjustments

Total accumulated other

comprehensive income

Stock acquisition

rights

Minority interests

Total net assets


17,909 (1,383) (3,827) 12,699 1,514 412,575 1,446,676


Issuance of new shares 41,907

Cash dividends (20,276)

Net income 45,600

Repurchase of stock (12,010)

Disposal of treasury stock 9,827


5,408 (739) 17,791 22,461 156 150,227 172,845

Total changes during period 5,408 (739) 17,791 22,461 156 150,227 237,893

Balance at end of period 23,318 (2,122) 13,964 35,160 1,670 562,802 1,684,569

20

(4) Consolidated Statements of Cash Flows (Millions of yen)



Amount Amount Cash flows from operating activities Income before income taxes and minority interests 191,865 147,540 Depreciation and amortization 151,498 172,562 Amortization of goodwill 9,196 11,300 Amortization of negative goodwill (8,238) (192) Gain on negative goodwill (332) (14,182) Increase (decrease) in allowance for doubtful accounts (7,930) 4,692

Increase (decrease) in allowance for loss on refund of interest received (5,116) (1,048)

Increase (decrease) in provision for bonuses (943) 3,623 Increase (decrease) in liabilities for retirement benefits 450 (593) Interest and dividend income (4,567) (5,568) Interest expense 10,975 13,056 Foreign exchange (gains) losses - net (5,179) 7,410 Equity in (gains) losses of equity-method affiliates (7,764) (5,819) Gain on sale of fixed assets (946) (7,308) Loss on disposal and sale of fixed assets 3,528 10,833 Impairment losses 31,934 35,216 (Gain) loss on change in equity interest (1,609) (10,375) (Gain) loss on sale of subsidiaries’ stock (7,336) (462) (Gain) loss on step acquisition (8,355) 9,760

(Increase) decrease in notes and accounts receivable - trade (31,818) (266,630)

(Increase) decrease in merchandise inventories (26,819) (42,094) (Increase) decrease in financial loan receivable (2,732) 22,206 (Increase) decrease in loans in banking business (29,305) (135,923) Increase (decrease) in notes and accounts payable - trade (27,551) 33,726

Increase (decrease) in deposits received in banking business 20,013 546,006

Other assets and liabilities (25,003) 30,361 Other - net (1,138) (5,930) Sub total 216,770 552,167 Interest and dividends received 4,222 5,760 Interest paid (10,792) (13,282) Income taxes paid (68,172) (61,879) Insurance income 261 - Net cash provided by (used in) operating activities 142,289 482,765

21




Cash flows from investing activities Purchase of marketable securities (1,000) (224)

Proceeds from sale and redemption of marketable securities 3,200 224

Purchase of marketable securities in banking business (34,197) (177,547)

Proceeds from sale and redemption of marketable securities in banking business 42,878 180,786

Purchase of fixed assets (328,011) (375,331) Proceeds from sale of fixed assets 4,158 162,346 Purchase of investment securities (6,633) (23,272) Proceeds from sale of investment securities 399 2,194 Proceeds from sale of subsidiaries’ stock 18,809 478

Cash paid in conjunction with the purchases of consolidated subsidiaries’ stock (35,769) (30,480)

Cash received in conjunction with the purchases of consolidated subsidiaries’ stock 612 27,247

Collection of loan receivables 446 540 Payments for fixed leasehold deposits to lessors (15,229) (29,900) Collection of fixed leasehold deposits to lessors 28,397 35,852 Proceeds from lease deposits from lessees 15,287 28,415 Repayments of lease deposits from lessees (19,831) (24,555) Other - net 1,612 1,604 Net cash provided by (used in) investing activities (324,869) (221,621) Cash flows from financing activities

Net increase (decrease) in short-term borrowings and commercial paper

190,446 (53,716)

Proceeds from long-term debt 298,147 316,864 Repayments of long-term debt (238,142) (304,384) Proceeds from issuance of bonds 105,225 4,775 Payments for redemption of bonds (82,840) (41,694) Purchase of treasury stock (2) (12,010)

Proceeds from issuance of subsidiaries’ stock to minority shareholders

3,099 54,962

Repurchase of subsidiaries’ stock from minority shareholders

(15,007) (76)

Dividends paid to shareholders (27,177) (20,276) Dividends paid to minority shareholders (10,356) (14,134) Other - net (156) 1,882 Net cash provided by (used in) financing activities 223,234 (67,806)

Foreign currency translation adjustments on cash and cash equivalents

11,156 15,401

Net increase (decrease) in cash and cash equivalents 51,810 208,738 Cash and cash equivalents, beginning of period 166,277 424,701 Increase in cash and cash equivalents resulting from merger 1,584 -

Increase in cash and cash equivalents resulting from share exchange

205,028 -

Increase (decrease) in cash and cash equivalents resulting from change of scope of consolidation

- (316)

Cash and cash equivalents, end of period 424,701 633,123

22

(5) Notes on the Going-concern Assumption

Not applicable

(6) Material Changes to the Basis of Preparation of Consolidated Financial Statements

Changes to accounting policy and presentation method (Change in inventory valuation method)

Effective from the fiscal year ended February 28, 2014, the method for inventory valuation used in some consolidated subsidiaries operating specialty store business changed from the retail method to the moving-average method.

These consolidated subsidiaries have introduced a new inventory control system, which improves accuracy in controlling inflow and outflow of merchandise by each item. With the new system, the specialty store business changed their inventory valuation method so as to check inventory value more appropriately and swiftly and to calculate periodical profit and loss more precisely.

The change in accounting policy was retroactively applied, and the consolidated financial statements for the fiscal year ended February 28, 2013 have been adjusted to reflect the change.

As a result, for the year ended February 28, 2013, operating income, ordinary income, and income before income taxes and minority interests were each 372 million yen lower than what they were before the retroactive application. Retained earnings at the beginning of the fiscal year ended February 28, 2013 was 673 million yen lower because cumulative effects were reflected in the amount of net assets at the beginning of the fiscal year ended February 28, 2013.

Effects on segments and per share information are presented in the relevant sections of this document.

(Change in presentation method for consolidated statements of cash flows)

During the fiscal year ended February 28, 2013, consolidated subsidiaries operating financial service business changed their accounting treatment for “increase (decrease) in allowance for doubtful accounts,” “(increase) decrease in financial loan receivable,” and write-off of operating receivables which are held by these consolidated subsidiaries and not included in “(increase) decrease in financial loan receivable.” As a result, the Company has changed to include write-off of these operating receivables in said accounting titles under “cash flows from operating activities.”

The consolidated statements of cash flows for the fiscal year ended February 28, 2013 have been recast to reflect the change in presentation method, which has no effects on the amount of “net cash provided by (used in) operating activities” for the fiscal year ended February 28, 2013.

For reference, in the category of “cash flows from operating activities” for the fiscal year ended February 28, 2013, “increase (decrease) in allowance for doubtful accounts” was 24,093 million yen lower, “(increase) decrease in financial loan receivable” and “(increase) decrease in notes and accounts receivable – trade” were higher by 19,987 million yen and 4,105 million yen, respectively.

(7) Additional Information (Accounting treatment for Employee Stock Ownership Plan Trust)

The Company’s representative executive officer decided on January 22, 2013 to introduce Employee Stock Ownership Plan Trust (“ESOP Trust”) from June 4, 2013. ESOP Trust is an incentive scheme that provides the Company’s workforce with ownership interest in the Company to further enhance the corporate value over the mid-to-long term.

23

ESOP Trust covers all Aeon employees who are members of the employees’ stockholding association (“Association”). Under ESOP Trust, the Company sets up a trust account in a trust bank with beneficiaries being the employees who belong to the Association and satisfy certain requirements. ESOP Trust buys the Company’s stock in advance in the volume expected to be acquired by the Association in the five years following the establishment of the ESOP Trust. It then sells the Company’s stock at market price to the Association on a pre-determined day each month. If the Company’s stock price rises and ESOP Trust holds a gain at the expiration of the trust, the gain will be distributed to the beneficiaries depending on their contribution ratio. ESOP Trust borrows the money needed to purchase Company stock and has its loans guaranteed by the Company. If ESOP Trust cannot pay off the debts at the expiration of the trust due to lower price of the Company’s stock or other factors, the Company will perform the obligation on behalf of ESOP Trust.

In the non-consolidated financial statements, ESOP Trust is accounted for using the gross method with which the Company’s stock held by ESOP Trust is included in treasury stock under nets assets. As of February 28, 2014, the book value of treasury stock recorded with the gross method was 10,279 million yen (8,100,700 shares) and the book value of debts recorded under the gross method was 10,800 million yen.

(8) Notes on the Consolidated Financial Statements

Notes and other supplementary information for the consolidated balance sheets, the consolidated statements of income and consolidate statements of comprehensive income, the consolidated statements of changes in shareholders’ equity, and the consolidated statements of cash flows are omitted from this report.

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(Segment and Other Information) [Segment Information]

1. Overview of Reportable Segments

Aeon has adopted the “committee system” as its governance model. Under the system, operational

supervision and operational execution functions are explicitly divided and allocated to individual

directors and executive officers. The system enables swift management decision-making by delegating

significant authority to executive officers to enable them to achieve medium- and long-term targets.

Aeon’s reportable segments are components of its operations about which segment-specific financial

statements are available. These segments are subject to periodic examinations to enable Aeon’s

management to decide how to allocate resources and assess performance.

Led by Aeon Co., Ltd, a pure holding company, the Group companies conduct various business

operations, including the Group’s core retail store operations, which primarily revolve around general

merchandise stores, comprehensive financial services operations, shopping center development

operations, and service operations.

The main operations in each reportable segment and other businesses are thus as follows.

The GMS Business includes general merchandise stores (GMS).

The Supermarket Business includes supermarkets (SM).

The Strategic Small-size Store Business includes convenience stores, small-scale supermarkets, and specialty stores that sell packaged lunches and household dishes.

The Financial Service Business includes credit card, fee-based services, and banking businesses

The Shopping Center Development Business includes development and leasing of shopping centers and malls.

The Service Business includes facilities management services, amusement services, and food services.

The Specialty Store Business includes specialty stores that sell family casual apparel, women’s apparel, footwear, and others.

The ASEAN Business includes retail stores in the ASEAN region.

The China Business includes retail stores in China.

Other Businesses include discount stores, drugstores, e-commerce, etc.

25

2. Operating revenue, income/loss, assets, liabilities and other items by reportable segment Year ended February 28, 2013 (March 1, 2012 – February 28, 2013)

(Millions of yen) Reportable segment

GMS SupermarketStrategic

Small-size Store

Financial Services

Shopping Center

Development Service

Specialty Store

Operating revenue: (1) Revenue attributable

to customers 2,610,613 1,478,384 238,793 168,051 152,651 198,342 343,488

(2) Intersegment revenue or transfers 53,735 2,332 3,100 26,179 50,625 145,305 6,745

Total 2,664,349 1,480,717 241,894 194,230 203,277 343,648 350,234Segment income (loss) 46,423 21,862 4,088 33,867 42,972 19,765 5,746Segment assets 1,432,179 566,064 166,525 2,318,915 822,957 175,388 135,680Segment interest-bearing debt

405,550 138,550 4,505 718,075 298,191 8,772 16,935

Other items: Depreciation and

amortization 51,472 21,262 8,817 11,586 30,017 6,933 4,295

Equity in gains (losses) of equity-method affiliates

(256) 1,478 (35) 2,405 56 438 395

Impairment loss 17,055 6,136 2,313 - 2,799 257 1,500 Investment in

equity-method affiliates 23,000 39,165 533 - 1,305 - 2,340

Increase in tangible and intangible fixed assets

118,635 33,298 14,283 13,979 96,253 10,606 6,464

Reportable segment

ASEAN China Total Other Total Adjustments

*1, 2

Reported in the

consolidated statements of

income*3 Operating revenue: (1) Revenue attributable

to customers 103,054 112,832 5,406,213 268,095 5,674,309 10,994 5,685,303

(2) Intersegment revenue or transfers

219 131 288,375 6,549 294,924 (294,924) -

Total 103,273 112,963 5,694,588 274,645 5,969,234 (283,930) 5,685,303Segment income (loss) 6,684 (1,835) 179,576 857 180,434 10,192 190,626Segment assets 129,609 85,917 5,833,238 116,568 5,949,807 (224,971) 5,724,835Segment interest-bearing debt 13,128 47 1,603,757 23,305 1,627,062 11,985 1,639,048


amortization 4,555 3,274 142,215 3,573 145,788 5,709 151,498


(10) - 4,471 2,891 7,362 401 7,764

Impairment loss 26 563 30,653 1,280 31,933 0 31,934 Investment in

equity-method affiliates 26 - 66,372 17,555 83,928 3,469 87,397


7,643 6,001 307,167 5,362 312,530 11,106 323,637

Note: 1.Main components of the 10,994 million yen in adjustments for revenue attributable to customers are (a) minus 96,464 million yen in adjustments to transactions reported in the reportable segment information and (b) 107,001 million yen in operating revenues of Group companies attributable to Aeon Group merchandise supply that does not fall into any of the business segments.

2. Main components of the 10,192 million yen in adjustments for segment income are (a) 2,874 million yen

in income of the pure holding company (Aeon Co., Ltd.) not attributable to any of the business segments,

26

(b) 7,526 million yen in income of Group companies attributable to Aeon Group merchandise supply that does not fall into any of the business segments, and (c) minus 2,267 million yen in intersegment transaction eliminations.

3. Segment income adjustments are based on operating income reported in the consolidated statements of

income for the corresponding period. 4. As stated in “Changes to accounting policy and presentation method” above, effective the fiscal year ended

February 28, 2014, the method for inventory valuation has been changed in some consolidated subsidiaries operating specialty store business. Segment information for the fiscal year ended February 28, 2013 has been retrospectively adjusted to reflect the change in accounting policy. As a result, for the fiscal year ended February 28, 2013, in Specialty Store, segment income were 372 million yen lower and segment assets were 1,026 million yen lower, compared with what they were before the retroactive application.

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Year ended February 28, 2014 (March 1, 2013 – February 28, 2014)



Small-size Store

Financial Services

Shopping Center

Development Service

Specialty Store

Operating revenue: (1) Revenue attributable

to customers 2,986,653 1,551,249 274,789 256,445 163,740 237,585 335,542

(2) Intersegment revenue or transfers

66,831 2,606 5,366 29,244 56,057 149,775 6,029

Total 3,053,484 1,553,856 280,155 285,690 219,797 387,360 341,572Segment income (loss) 35,038 12,208 4,461 40,884 43,384 19,889 3,546Segment assets 1,635,589 621,169 170,666 2,880,768 974,185 189,216 148,127Segment interest-bearing debt

345,078 148,023 5,779 633,369 288,414 11,189 24,500


amortization 56,588 22,662 9,586 15,329 33,322 9,895 4,338


214 1,468 (26) 163 146 3 155

Impairment loss 17,007 6,480 3,872 - 1,285 370 1,988 Investment in

equity-method affiliates 301 48,485 609 16,708 1,383 279 2,428


80,050 31,911 14,177 28,600 217,036 14,408 7,670

Reportable segment

ASEAN China Total Other Total

Adjustments*1, 2

Reported in the

consolidated statements of

income*3 Operating revenue: (1) Revenue attributable

to customers 181,370 145,248 6,132,625 294,919 6,427,545 (32,402) 6,395,142

(2) Intersegment revenue or transfers 300 214 316,426 8,203 324,630 (324,630) -

Total 181,671 145,463 6,449,052 303,123 6,752,175 (357,033) 6,395,142Segment income (loss) 6,602 (1,765) 164,251 3,311 167,563 3,869 171,432Segment assets 167,335 104,808 6,891,866 121,882 7,013,749 (198,507) 6,815,241Segment interest-bearing debt

19,335 48 1,475,739 21,681 1,497,421 77,470 1,574,892


amortization 7,245 4,469 163,440 3,664 167,104 5,457 172,562


2 - 2,128 3,344 5,472 346 5,819

Impairment loss 243 2,729 33,976 1,239 35,216 - 35,216 Investment in

equity-method affiliates 34 - 70,230 23,864 94,095 3,633 97,728


26,198 3,426 423,480 5,700 429,180 12,982 442,163

Note: 1.Main components of the minus 32,402 million yen in adjustments for revenue attributable to customers are (a) minus 116,049 million yen in adjustments to transactions reported in the reportable segment information and (b) 83,460 million yen in operating revenues of Group companies attributable to Aeon Group merchandise supply that does not fall into any of the business segments.

2. Main components of the 3,869 million yen in adjustments for segment income are (a) 5,568 million yen in

income of the pure holding company (Aeon Co., Ltd.) not attributable to any of the business segments, (b) 593 million yen in income of Group companies attributable to Aeon Group merchandise supply that does

28

not fall into any of the business segments, and (c) minus 3,699 million yen in intersegment transaction eliminations.

3. Segment income adjustments are based on operating income reported in the consolidated statements of

income for the corresponding period.

29

[Related Information] Year ended February 28, 2013 (March 1, 2012 – February 28, 2013)

1. Information by merchandise and service

The information is omitted here because the same information is presented in the “Segment

Information” above.

2. Information by geographic area

(1) Operating revenue

(Millions of yen) Japan ASEAN China Other Total

5,349,788 151,872 128,774 54,868 5,685,303Note: 1. Operating revenues are based on the location of customers and classified into countries or

regions.

(2) Property, buildings and equipment


1,817,423 94,015 23,195 7,068 1,941,702 3. Information by major customer

The information is omitted here because no customer accounts for more than 10% of the operating revenue on the consolidated statements of income.


1. Information by merchandise and service


Information” above.

2. Information by geographic area

(1) Operating revenue

(Millions of yen)

Japan ASEAN China Other Total 5,896,124 257,904 168,986 72,127 6,395,142

Note: 1. Operating revenues are based on the location of customers and classified into countries or regions.

(2) Property, buildings and equipment


1,997,734 140,673 36,603 7,798 2,182,809

3. Information by major customer The information is omitted here because no customer accounts for more than 10% of the operating revenue on the consolidated statements of income.

30

[Impairment loss on fixed assets by reportable segment]



Information” above. Year ended February 28, 2014 (March 1, 2013 – February 28, 2014) The information is omitted here because the same information is presented in the “Segment Information” above.

31

[Amortization for and unamortized balance of goodwill by reportable segment] Year ended February 28, 2013 (March 1, 2012 – February 28, 2013)



Small-size Store

Financial Services

Shopping Center

Development Service

Specialty Store

(goodwill) Amortization for the fiscal year ended Feb. 28, 2013

177 2,198 2,270 645 2,714 603 271

Balance at Feb. 28, 2013 1,882 30,107 27,401 26,110 39,329 9,958 2,248(negative goodwill)

Amortization for the fiscal year ended Feb. 28, 2013

7,980 3 - 28 - 11 173

Balance at Feb. 28, 2013 - 8 - - - 16 194

Reportable segment

ASEAN China Total Other Adjustments Total


38 261 9,180 15 - 9,196

Balance at Feb. 28, 2013 3,438 174 140,650 421 - 141,071(negative goodwill)

Amortization for the fiscal year ended Feb. 28, 2013 40 - 8,238 - - 8,238

Balance at Feb. 28, 2013 - - 218 - - 218 Year ended February 28, 2014 (March 1, 2013 – February 28, 2014)



Small-size Store

Financial Services

Shopping Center

Development Service

Specialty Store


139 2,950 2,095 1,860 2,460 994 353

Balance at Feb. 28, 2014 1,740 42,683 25,306 25,820 31,968 9,377 2,654(negative goodwill)


- 8 - - - 11 173

Balance at Feb. 28, 2014 - - - - - 5 20

Reportable segment

ASEAN China Total Other Adjustments Total


177 174 11,206 94 - 11,300

Balance at Feb. 28, 2014 2,564 - 142,115 316 - 142,431(negative goodwill)


- - 192 - - 192

Balance at Feb. 28, 2014 - - 25 - - 25

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[Gain on negative goodwill by reportable segment]


No gain on negative goodwill was recorded.


Daiei Inc. has been newly consolidated in GMS segment. Due to this, 13,820 million yen of gain on

negative goodwill was recorded for the fiscal year ended February 28, 2014.

33

(Per Share Information) Year ended

February 28, 2013 (March 1, 2012 –

February 28, 2013)


(March 1, 2013 – February 28, 2014)

Net assets per share (yen) 1,305.14 1,336.83Net income per share (yen) 95.49 55.92Net income per share - fully diluted (yen) 87.42 50.13

(Note) Data for calculation 1. Net assets per share

February 28, 2013 February 28, 2014

Total net assets on the consolidated balance sheets (millions of yen)

1,446,676 1,684,569

Net assets attributable to common stock (millions of yen)

1,032,586 1,120,095

Main component of difference Minority interests (millions of yen)

412,575 562,802

Number of common stock shares issued (thousands of shares)

800,446 846,396

Number of common stock shares in treasury (thousands of shares)

9,275 8,522

Number of common stock shares used for calculation of net assets per share (thousands of shares)

791,171 837,874

2. Net income per share and net income per share fully diluted


(March 1, 2012 – February 28, 2013)


(March 1, 2013 – February 28, 2014)

Net income (millions of yen) 74,511 45,600Amount not attributable to common stockholders (millions of yen)

- -

Net income attributable to common stock (millions of yen)

74,511 45,600

Average number of common stock shares outstanding (thousands of shares)

780,316 815,505

Main components of adjustment for net income used to calculate net income per share - diluted (millions of yen)

Changes in equity interest resulted from stock acquisition rights issued by consolidated subsidiaries

(155) (3,487)

Interest expenses less tax 89 14Adjustment for net income (millions of yen) (65) (3,473)Increase in number of common stock shares used to calculate net income per share - diluted (thousands of shares)

(Of which, convertible bonds with stock acquisition rights)

71,285

70,904

24,857

24,422

Residual securities not included in the calculation for net income per share diluted because they have no dilutive effect

Type of residual securities: The AEON Co., Ltd. #2 Stock Acquisition Rights

Type of residual securities: The AEON Co., Ltd. #2 Stock Acquisition Rights

Number of residual securities:918

Number of residual securities: 918

34

Note. 1. As stated in “Changes to accounting policy and presentation method” above, effective the fiscal year ended February 28, 2014, the method for inventory valuation has been changed in some consolidated subsidiaries operating specialty store business. Net assets per share, net income per share, and net income per share - fully diluted for the fiscal year ended February 28, 2013, have been retrospectively adjusted to reflect the change in accounting policy. As a result, for the fiscal year ended February 28, 2013, net assets per share was 1.09 yen lower, net income per share was 0.24 yen lower, and net income per share - fully diluted was 0.22 yen lower, compared with what they were before the retroactive application.

2. Average number of common stock shares outstanding for the fiscal year ended February 28, 2014 does not include the Company’s common stock held by the Employee Stock Ownership Plan Trust (at February 28, 2014, the trust holds 8,100 thousand shares). The Average number of common stock shares held by the trust for the fiscal year ended February 28, 2014 was 5,964 thousand shares.

(Material Subsequent Events) Material amounts of bonds issuance by consolidated subsidiaries The Company's consolidated subsidiary Aeon Financial Service Co., Ltd. issued Unsecured Subordinated Callable Bonds, series 1 and 2 as well as Unsecured Bonds (with special pari passu conditions among bonds), series 1 and 2. Aeon Mall Co., Ltd. issued Unsecured Bonds (with special pari passu conditions among bonds), series 5. These bonds issuance are summarized below. 1. Aeon Financial Service Co., Ltd.

(1) Name of bonds Aeon Financial Service Co., Ltd. Unsecured Subordinated Callable Bonds, series 1

(2) Total amount of bonds 30,000 million yen

(3) Interest rate Up to 5 years and one month：0.83% (fixed rate) After 5 years and one month：Six-months Euroyen LIBOR + 1.95% (floating rate)

(4) Date of issuance March 27, 2014

(5) Date of maturity

April 26, 2024 Provided, however, that, after 5 years and one month from the due date for payment, the bonds may be called before maturity at every interest payment date.

(6) Collateral The bonds are not secured or guaranteed. No assets are reserved for the bonds.

(1) Name of bonds Aeon Financial Service Co., Ltd. Unsecured Subordinated Callable Bonds, series 2

(2) Total amount of bonds 10,000 million yen

(3) Interest rate Up to 5 years and one month：0.83% (fixed rate) After 5 years and one month：Six-months Euroyen LIBOR + 1.95% (floating rate)

(4) Date of issuance March 27, 2014

(5) Date of maturity

April 26, 2024 Provided, however, that, after 5 years and one month from the due date for payment, the bonds may be called before maturity at every interest payment date.


35

(1) Name of bonds Aeon Financial Service Co., Ltd. Unsecured Bonds (with special pari passu conditions among bonds), series 1

(2) Total amount of bonds 10,000 million yen (3) Interest rate 0.349% (4) Date of issuance March 18, 2014 (5) Date of maturity March 18, 2019


(1) Name of bonds Aeon Financial Service Co., Ltd. Unsecured Bonds (with special pari passu conditions among bonds), series 2



2. Aeon Mall Co., Ltd.

(1) Name of bonds Aeon Mall Co., Ltd. Unsecured Bonds (with special pari passu conditions among bonds), series 5



aeon co., ltd. - marketscreener.com co...this is an abridged translation of the original japanese...

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